A highly competitive option for student housing finance through Freddie Mac
The student housing finance market has evolved greatly in the past 20 years. With millions of people attending colleges and universities in the U.S. each year, the student housing market is absolutely one worth investing in. Still, in a niche market such as the student housing market, choosing the right loan program is crucial.
For borrowers and investors seeking to adequately house the next generation of American leaders, the Freddie Mac Student Housing Loan is one of the best ways to accomplish that goal.
Freddie Mac is no stranger to the niche student housing market space, having originated over $9 billion and securitized nearly $5 billion in student housing loans since 2010 alone! Their extensive experience and robust understanding of the unique qualities of student housing has led them to have one of the most flexible and competitive student housing loan programs available.
Freddie Mac offers their student loan program with up to 80% LTV and a DSCR minimum at 1.30 depending on the loan structure. Generally, FRMC student housing loans come with terms between 5-10 years but terms of up to 30 years are available for any fixed-rate loan not purchased for securitization. All dedicated student housing property types are permitted, including high-rise, mid-rise, garden, and cottage style properties.
Freddie Mac Student Housing Loan Guidelines
Eligible Borrowers -
- A limited partnership, corporation, limited liability company, or a tenancy in common (TIC) with 10 or fewer tenants in common
- General partnerships, limited liability partnerships, real estate investment trusts (REITs), and certain trusts may have limited eligibility, and are subject to additional requirements
- Must generally be a Single Purpose Entity (SPE). On loans less than $5 million,a borrower other than a TIC may be a Single Asset Entity instead of an SPE, if requested
- If the borrower is structured as a TIC, each tenant in common must be an SPE
Eligible Property Types -
- Purpose-built student housing properties with a minimum of one bathroom for every two bedrooms and each apartment is required to have a separate full kitchen
- Stabilized garden, mid-rise, and high-rise apartment properties with a student tenant population greater than 50%
- Supporting college/university has 8,000 or more students or alternatively, student housing properties located within close proximity to multiple schools that have a combined student body of 8,000 students or more (to be considered at lender’s discretion)
- Property is located no more than two miles from college/university or on a public transportation route
Terms - 5-10 years (up to 30 years for fixed-rate loans if the loan is not purchased for securitization)
Amount - Generally, $5 million to $100 million (larger and smaller loans at lender’s discretion)
Maximum Amortization - 30 years
Financing Options - Acquisition or refinance
Ground Lease - May be permitted for land owned by a college or university with prior approval
Lease Parameters -
- Individual tenant lease by the apartment, bedroom, or by the bed
- Rent under a master lease allowable with prior approval
Lease Terms - Between 9 and 12-months (12-month is preferred)
Lease Guaranty - Parental guaranty is preferred
Recourse Requirements - Non-recourse with standard “bad boy” carve-outs
Supplemental Loans - Available subject to requirements in the Loan Agreement and current Freddie Mac program and product requirements at the time of the supplemental loan request
Exclusions -
- Residence halls
- Multiple occupancy rooms with a shared common bathroom
- Centralized food service areas
- Dining halls
Tax and Insurance Escrow - Generally required
Replacement Reserve Deposit - Generally a minimum of $150 per bedroom or $300 per unit
Application Fee - Greater of $2,000 or 0.1% of loan amount
Early Rate-Lock Options - Early rate-lock and Index Lock options available in most cases
Refinance Test - No Refinance Test is necessary if the loan has an amortizing debt coverage ratio (DSCR) of 1.40x or higher and an LTV of 60% or less